Cotton futures jumped on aggressive speculative fund buying to finish on Wednesday at a three-month high, but brokers said further gains seems out of reach because the rally is overdone. The New York Board of Trade's open-outcry July cotton contract went up 1.45 cents to end at 55.75 cents per lb, moving from 53.75 to 56.50 cents.
It was the highest close for cotton on a spot basis since early March. The benchmark December cotton contract jumped 2.32 cents to close at 61.42 cents, having traded from 59 cents to the lifetime high of 62.10 cents. The rest increased from 2.00 to 2.50 cents.
IntercontinentalExchange's NYBOT electronic cotton market showed the July contract up 1.11 cents to 55.41 cents at 2:33 pm EDT (1833 GMT). "We took out 60 (cents, in key December) and never looked back," said Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia. "This appears to be mostly technical and fund-driven."
Once the now-benchmark December hit its new lifetime peak, most of the funds took cash off the table and a modicum of trade sales sent the contract reeling back, dealers said. Talk circulated amongst the trade whether the move was fuelled by any kind of buying from top consumer China.
"The short answer is we don't know but we'll find out soon enough," a dealer said. Looking toward the weekly export sales report from the US Agriculture Department, cotton brokers said they expect total US cotton sales to range from 100,000 to 250,000 running bales (RBs, 500-lbs each), versus sales in last week's report of 185,000 RBs.
US cotton shipments of previously booked orders are seen running from 400,000 to 500,000 RBs, against 451,600 RBs in last week's data. By next week, the focus of the trade will turn to the USDA's annual plantings acreage report due out June 29.
Brokers Flanagan Trading Corp sees resistance in the July contract at 56.20 and 56.80 cents, with support at 55.15 and 54.60 cents. Floor dealers said final estimated open-outcry volume stood at 38,000 lots, from the prior volume of 9,990 lots. Screen trade Tuesday was at 16,796 lots, NYBOT said. Open interest was at 204,269 lots as of June 19, down 2,907 lots from the previous session.
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